Expat Mortgages – A-Z Glossary of mortgage terms

A-Z of mortgage terms

Agreement in principle – This refers to an initial assessment by a mortgage lender that indicates what they may be prepared to offer to you in way of a mortgage. It is not binding on the lender but provided you meet the lenders criteria, it should give you a good guide to what you might be able to obtain from that lender.


Arrears – If you have an expat mortgage and miss making one or more of your monthly repayments, you will be in arrears and have defaulted on your mortgage. If you miss a payment date on your mortgage, you should contact your lender immediately.


Base rate – this is an interest rate that is set by the Bank of England and is often used by expat mortgage lenders as a reference point for setting their variable rates of interest.


Booking fee – When you apply to a lender for an expat mortgage product the you will usually be charged a fee by the lender for setting up your expat mortgage. This is the booking fee and sometimes it is referred to as an arrangement fee.


Broker – This term refers to a qualified person or company who has been approved by the Financial Conduct Authority to provide mortgage advice to those seeking a mortgage.


Buy-to-let – This term refers property that is purchased for the sole purpose of renting out for profit.


Capital – This is a term that refers to an amount of money. In mortgage terms it can refer to the money you intend to borrow or the amount of deposit you intend to put down on the property.


Capped rate – This refers to a variable rate mortgage product where the interest rate will not rise above a set level, even if general interest rates go higher.


Capped and collared expat mortgages – This refers to a variable rate mortgage product where the interest rate will only vary between a set bottom rate and a set higher rate. If general interest rates go higher or lower than these set points then the interest rate that is applied to your mortgage will not move outwith these set limits.


Cashback expat mortgages – What this means is that when your mortgage application has been successful and your solicitor completes on your mortgage, your lender will give you back a certain amount of cash.


CCJ – This is an abbreviation for County Court Judgement. This is a county ruling made against you for non-payment of debt.


Collared expat mortgages – This refers to a variable rate mortgage product where the interest rate is collared at a minimum level. When interest rates fall below that level your mortgage payments will continue to be based on the collared rate.


Conveyancing – This refers to the legal process involved in buying or selling a property. It is normally carried out by your solicitor who will conduct all the necessary searches, registrations and money handling.


Deposit – The deposit on a property purchase refers to the amount of your own money you will need to put towards the purchase price of the property excluding any mortgage you have arranged for the property. Deposits on buy to let property is usually a minimum of 25% of the purchase price but residential properties can be as low as 5%.


Discounted-rate expat mortgage – This is where your mortgage product has an interest rate that will be at a set amount below the lenders normal variable rate or other rate index the lender chooses to follow.


Early repayment charges – Where your mortgage product has a fixed interest rate period or other term restriction your lender may charge a penalty if you terminate the mortgage before that period has expired.


Endowment mortgage – This is a type of interest only mortgage where yo also pay money into a type of insurance policy/investment called an endowment. This investment is expected to pay off the mortgage at the end of the term.


Equity – This refers to the amount of the property that you would keep if the property were to be sold. A quick wayto assess this is to take the current market value of the property and deduct any outstanding debt on the property.


Equity release – These are schemes that allows older homeowners to release some of the capital that is tied up in their property. There are two types of scheme called lifetime mortgages and home-reversion but there are certain risks associated with these schemes and independent financial advice should be obtained before considering either of these schemes.


Fixed-rate expat mortgage – This is a mortgage product where for an agreed initial period, the interest rate chargeable to the mortgage will remain the same, regardless of general interest rate movements.


Flexible expat mortgage – This is a type of mortgage product that allows you to overpay, underpay or even take a short holiday from making payments to your mortgage.


Freehold – this term refers to the ownership of the property and the land that it sits on. Freehold means that you own it outright.


Gazumping – This is a term that is applied when a buyer has had an offer accepted by the seller but later, the seller then accepts a higher offer from someone else.


Guarantor – This refers to someone who the lender accepts to provide a guarantee to make the mortgage payments in the event the borrower cant or wont. Usually this will be a parent or guardian of a first time buyer who has limited means.


Help to Buy – This is the term usually applied to the various government schemes that are aimed at helping lower income people to purchase property.


Higher lending charge – Where a borrower is applying for a high loan to value mortgage, lenders may sometimes charge an additional fee to cover the higher risk of you defaulting on your mortgage.


Interest-only expat mortgages – This is a mortgage product where for the duration of the mortgage term, you only repay to the lender the interest charged on the mortgage. At the end of the mortgage term you will still owe the lender the same amount as the original mortgage loan. Borrowers with this type of mortgage should have some form of investment in place to ensure the loan can be repaid at the end of the term.


Intermediary – This is the term used to refer to a mortgage adviser who can help you to arrange your mortgage. The adviser mediates between you the borrower and all lenders if the adviser is able to cover whole of market.


Land Registry – This is the official register for holding the details of who owns property in the UK. When you purchase a property your solicitor will register you here.


Leasehold – This is where you purchase a property but the land on which it sits is owned by the leaseholder and at the end of the lease period, the property and land will revert to the leaseholder. Leases can be anything up to 999 years but if the lease is short, under 70 years, you may find that lenders will refuse to mortgage the property.


Lifetime mortgages – This is a form of equity release where the mortgage runs until you die. The property is then sold and the lender takes the original loan amount plus the accumulated interest and the remainder is added to your estate.


Loan-to-value (LTV) – This is a ratio used by lenders while assessing you for a mortgage. It is the amount of mortgage divided by the total value of the property expressed in percentage terms.


Monthly repayment – This is the payment you will make to your lender each month over the term of your mortgage. The amount you pay will vary in accordance with the interest rate your lender applies.


Mortgage deed – This is a document which constitutes a formal contract between the lender and the borrower which sets out the legal obligations of the borrower and the rights of the lender should the borrower fail to keep up the repayments on the mortgage.


Mortgage payment protection insurance – this is a type of Insurance policy that is designed to make your mortgage payments for a period of time, usually one year, should you become unable to work due to accident, sickness or unemployment.


Mortgage term – This is simply the that will elapse over the course of repaying the mortgage. It is usually expressed in years.


Negative equity – When you owe money on a property through a mortgage and the value of your property falls below the amount of your mortgage then you would be in negative equity. In simple terms, you would owe more on the property than the property is worth and the difference is the amount of negative equity you have in the property.


Offset expat mortgages – This type of mortgage is where the lender links the mortgage to a savings account where the balance on the savings account is used to offset the amount of the mortgage. You then only pay interest on the difference.


Portable expat mortgages – With this type of mortgage the lender will allow you to transfer your mortgage product from your existing property to another property when you want to move. This avoids paying arrangement fees to set up a new mortgage.


Rebuilding cost – This is the amount used in building insurance policies for setting risk against the cost of rebuilding the property should it be destroyed by fire, flood or accident.


Remortgage – This is where you change your mortgage product either with the same lender or with a different lender. Usually, this is done to obtain a better interest rate to reduce the mortgage repayments.


Repayment expat mortgages – With this type of expat mortgage you pay both the interest on the mortgage plus a portion towards the mortgage loan. This type of mortgage guarantees that the mortgage will be repaid by the end of the term provided payments have been kept up.


Repayment vehicle – This is a form of savings plan that interest only lenders require to be put in place and maintained throughout the term of the mortgage. Its purpose is to create a sufficient sum that will pay off the mortgage at the end of the mortgage term.


Right to Buy – A scheme started by Margaret Thatcher to allow council tenants to purchase their homes at discounted prices. The scheme has now been opened up to housing association tenants as well.


Service charge – This is a charge that usually applies to flatted property where the grounds and building maintenance is handled by a managing agent. Each owner will pay their share of the cost.


Shared ownership – this type of arrangement is where you only buy a share in a property,usually between 25% and 75%, and pay rent on the remaining share, which is usually owned by the local housing association.


Stamp duty – This is a tax that is levied on the value of any property that you purchase. It is levied in bands with different rates of tax applying to each band. If the property you are buying is in addition to your main residence, then the tax on each band is increased by 3 percent.


Standard variable rate (SVR) – This is the interest rate that your lender will charge once any initial mortgage deal period ends. This could be higher or lower than your original rate and as the term indicates, will be subject to change throughout the term of the mortgage.


Sub-prime – A sub-prime mortgage is one that has been created to work for people who have credit problems. They were once quite common but in recent times have become almost impossible to obtain.


Tie-in period – Lenders incur costs in setting up mortgages and to protect themselves from losses, they usually specify a period during which you cannot redeem the mortgage. If you do redeem the mortgage within this period you will likely be charged an early repayment fee.


Tracker expat mortgages – With this type of expat mortgage, the interest rate that applies to your mortgage tracks the Bank of England base rate or other rate index your lender chooses, at a set margin above or below the tracking rate.


Valuation survey – Before your lender will issue you a mortgage offer on a property, they will carry out a valuation survey to check the market value of the property. This is purely a valuation survey and if you have any concerns about the structural soundness of the property you should have your own survey done.


Variable-rate expat mortgages – With this type of expat mortgage the interest rate that is applied will follow your lenders standard variable rate which will go up and down many times over the term of the mortgage.

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